In the Name of Allah, the Most Beneficient and the Most Merciful

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|Ans.1 |(a) |Quality Control Issues: | | | | |While assigning the audit work to Mr. Manzoor Nazar, the firm ignored the threat which existed due to his earlier | | | | |intention to join WL as an employee. | | | | |Mr. Manzoor also failed to update the firm about this matter, due to which firm could not ascertain the self-interest | | | | |threat to independence and objectivity of the engagement partner. | | | | |Engagement partner did not ensure the engagement reviewer had been appointed. As a result, significant matters arising | | | | |during the audit could not be discussed or resolved. | | | | |No consultation was undertaken on impairment loss issue, which was contentious and material. | | | | |It appears that engagement partner resolved the difference of opinion between the team member and the job in charge by | | | | |imposing his decision without satisfying the team member. No avenue was available to the team member to assert his | | | | |opinion. | | | | | | | | | |The following Risk Factors do not seem to have been considered: | | | | |Change in Board of Directors and significant change in Management. | | | | |Valuation of plant and machinery was being done by an employee who may have been an expert but his independence was | | | | |questionable. | | | | |Sudden change of assessment in the valuation creates doubts on the reliability of the work done. | | | | |Informing stock exchanges about impairment loss, uncertainty on fair value of plant and machinery, issue of right | | | | |shares at declined market price and acquisition of right shares by directors and their associates point to an apparent | | | | |motive of the Board of directors to accumulate WL’s shares at low price. | | | | | | | |` | |Deficiencies in Audit Approach: | | | | |In view of the management’s perceived motive of presenting poor financial position to affect the market price, the | | | | |representation by the management as regards impairment of plant and machinery is not a reliable evidence. | | | | |Opinion of the internal expert seems to have been influenced by the directors and the management. Thus, it should not | | | | |have been considered as appropriate evidence. | | | |...
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